That Lonesome Road

Apropos of my discussion with J in the Al Gore post, one measure of the disarray (gasp - can we even say that) in the GOP is their lurching forays into the healthcare debate.  Last week, John McCain joined Rudy Giiuliani and Mitt Romney in detailing a "healthcare plan" that was, like theirs, woefully short on actual detail.  And like the others it focused mainly on a new proposal to provide tax breaks and incentives to people who purchase health insurance as individuals in the open market.  By Friday the Wall Street Journal had joined in, calling these proposals "politically creative"... which, largely they aren't, but we'll get to that in a moment.  Finally, today John Boehner, the House Minority (heh heh) Leader announced that Congressional Republicans would join the fray with a proposal of their own.  He offered basically no elaboration on what that might entail.

So let's talk about tax incentives.  And then let's talk about why they're terrible.

The logic behind the Republican proposals goes like this: the history of Post World War II America's development of worker based health plans was borne out of a tax loophole that companies used to add benefit packages for workers - businesses can deduct their costs for worker's health insurance, and that in turn benefits workers.  The flaw in the system, always, was that people who weren't working, or whose employers did not take advantage of the benefit, went without.  In the early going, this was barely a problem - remember that in the fifties, most people were married, only the man worked outside the home, and few people went uncovered.

Gradually, though, those holes simply got bigger, and two other problems surfaced - one was that health care costs spiraled upward, and the other was that the people not being covered by an employer-based plan grew. Medicare was developed to help senior citizens in retirement (where non-unionized workers discovered that they had no insurance options... and then many unionized workers discovered that they could be shafted by their former employers even when they promised coverage into old age).  Medicaid was developed for people below the poverty line, mostly unemployed and thus uninsured.  And that seemed to help... for a while.

But health care costs continued to climb, and gradually, even employers had to weigh the value of a tax benefit against costly insurance that was out of line with other business costs.

The trouble with looking at where we are now as some definitive point is that it's not; we're in some sort of transition, likely a transition away from employer based health insurance, as more and more employers, and larger ones (which is key) get out of offering insurance benefits to their workers.  Thus, when we talk about fixes, one thing to keep in mind is that the wrong fix could set events in motion that make many things demonstrably worse, for instance, moving to offer more people the opportunity for coverage by the government (by, say opening up the federal worker health plans to the uninsured)  could serve as incentive for many employers to drop coverage altogether.

The bigger problem has to do with the natre of insurance.  Insurance is meant to make coverage affordable by spreading out the risk - a wide pool of insured people means less risk of catastrophic events requiring large payments in a large subset of people; this is especially true if, as an insurer, you can cherry pick the people you cover to favor the healthy and the young.  Which, really, is what insurers do in the employment based model - young healthy workers get low cost plans with good coverage they probably won't need and a few people with chronic conditions (like diabetes) benefit. This does nothin for smaller businesses and decidedly works against the individual.

The Republican proposals in their various shades (and the one that will likely come from the Congressional group as well) all intend to offer the individual purchaser some sort of tax break meant to mimic the employer option - it's usually something between $2,500 and $5,000 for individuals, more for families.  Most would combine that incentive with other incentives meant to drive more people into Health Savings Accounts (which would include the high-deductible plans associated with them, which tend to have lower premiums).

(Reader JW suggests that I haven't been fully informed on the McCain proposal; you can read the McCain team's own presentation here to decide for yourself.)

All of this, by the way, is very similar to the DOA proposal the President offered this past January in the run-up to the State of the Union speech, which has gone essentially nowhere.

The reason it went nowhere, and the reason these won't either is that the olution doesn't begin to identify the correct problem, and indeed, as noted above, creates an incentive with disastrous implications: most of these proposals are paid for by reducing the employer tax breaks.  Republicans claim to be going after "gold plated" plans, the types that go to Senior Executives in big corporations, which allow for high cost services unavailable to the average worker on the company's dime. Those plans, too, are fully deductible under current rules.  Whether they should be is debatable, but no matter: reducing the tax benefits employers get will be an incentive for companies to drop coverage.  And many of them will.

What we don't want, really, as a society, is to push more people into the individual market - this is the area of highest cost insurance, because of the difficulties of creating a knowable risk pool.  Republicans argue that this would be less the case if more people were in that market, but there's nothing to back that up; indeed, given a choice, many people, while healthy, will simply choose to forego the cost of insurance.  That will make the overall market sicker and more costly, and will in turn keep premiums high.

And that's before we get into the even weaker elements of HSAs and silliness like "tort reform" for malpractice, which Republicans cling to as Their Big Ideas.

The point is, there's absolutely nothing new here - nothing that hasn't already been run up the flagpole and roundly shot at.  Nether Romney, Giuliani, Thompson or McCain have a plan that will withstand the Democrats response come next year; at best, what they hope is that vague mantras of "socialized medicine" and "European style healthcare" will scare enough people away from Democratic proposals.  That's just wishful. Given the holes that have already been poked in the tax proposals (even $5,000 won't cover most policies; and if it's an after the fax tax break, most people have the money to lay out up front) and statistically, everyone acknowledges that these proposals won't substantively reduce the numbers of the uninsured anyway.  That's okay, Republicans like to argue, because they then dispute the number of uninsured, saying many of them are simply between jobs or worse... illegal immigrants.

What's really going to do the Republicans in on this issue, though, is admitting that there is an issue; up to now, Republicans have stonewalled debate on the healthcare crisis by saying there isn't one.  By admitting that good, decent hard working people are having trouble getting affordable insurance, and by extension, getting access to care thay are at the start of a road Democrats are already well down.  And, as we did, they're hitting the potholes we already hit, and lurching in much the same way we did.  The woeful lack of serious research, policy thinking, and proposals on healthcare by right wing think tanks is stunning; and it points to simply having been caught napping on a key issue that's now too far gone to ignore. The inability of right wing pundits to do little more than sputter as Democrats make this issue work for them is telling, and the fear among Republicans running in 2008 is palpable. There may be reasons to worry about the 2008 election, but healthcare as an issue... not really one of them.   

Comments

[J.W.]

You obviously didn't read the actual proposal. You read media accounts of the McCain proposal.